Turk­ish econ­omy turns fore­casts up­side down

Daily Sabah (Turkey) - - Business -

With the July 15 coup at­tempt, per­pe­trated by Gülenist Ter­ror Group (FETÖ), Turkey was sub­jected to a ma­jor act of ter­ror that many would have deemed im­pos­si­ble in the 21st cen­tury. At the time, Turkey was one of the only five coun­tries that achieved suc­ces­sive pos­i­tive growth for 27 quar­ters, thanks to its macro pru­den­tial mea­sures, whereas the global eco­nomic sys­tem has been strug­gling to re­cover from the 2008 fi­nan­cial cri­sis.

Hav­ing suc­cess­fully grown by 8.5 per­cent in 2013, 5.2 per­cent in 2014, and 6.1 per­cent in 2015, Turkey sus­tained its po­si­tion among the na­tions with high growth per­for­mance in the first two-quar­ters of 2016 (4.8 per­cent and 4.9 per­cent).

The failed coup at­tempt, how­ever, dis­rupted that series of pos­i­tive growth and the coun­try’s econ­omy con­tracted by 1.8 per­cent in the third quar­ter.

Fol­low­ing the coup, the govern­ment moved into the res­cue with a series of new eco­nomic mea­sures, sim­i­lar to those taken to off­set the ef­fects of the 2008 global fi­nan­cial cri­sis. Even­tu­ally, the Turk­ish econ­omy growth re­turned to pos­i­tive fig­ures in the fourth quar­ter of 2016 with 4.2 per­cent.

How­ever, by the end of 2016, the In­ter­na­tional Mon­e­tary Fund (IMF), World Bank (WB) and Or­ga­ni­za­tion for Eco­nomic Co­op­er­a­tion and Devel­op­ment (OECD) as well as in­ter­na­tional credit rat­ing agen­cies and fi­nan­cial in­sti­tu­tions all fore­casted that the Turkey’s growth would re­main un­der 3 per­cent in 2017 while some of them even pre­dicted it would be be­low 2 per­cent.

The Turk­ish eco­nomic ad­min­is­tra­tion en­tered the New Year with the restruc­tur­ing of a Credit Guar­an­tee Fund that es­pe­cially sup­ports small and medium sized en­ter­prises (SMEs), sim­i­lar to the one in South Korea.

The coun­try bounced back to achieve 5.2 per­cent and 5.1 per­cent growth in the first and sec­ond quar­ters of 2017, with no­table im­prove­ments in bank cred­its, con­struc­tion in­vest­ments and in ex­port vol­ume.

Lead­ing in­di­ca­tors show that the growth in gross do­mes­tic prod­uct (GDP) may even reach 7 per­cent in the third quar­ter, putting Turkey on par with China and In­dia.


As a mat­ter of fact, Turkey was ranked third for high­est growth rates among the G-20 coun­tries in the sec­ond quar­ter of the year, fol­low­ing China’s 6.8 and In­dia’s 5.7 per­cent.

In a global eco­nomic set­ting where the euro­zone grew on av­er­age by 2.3 per­cent, the U.S. by 2.2 per­cent, Ger­many by 2.1 per­cent, Bri­tain by 1.8 per­cent and France by 1.7 per­cent, Turkey ranked fourth in growth af­ter Slove­nia, Es­to­nia, and Ro­ma­nia.

Some 2.3 points of the 5.1 per­cent growth, which pushed Turkey to fifth place in global growth per­for­mances, stemmed from net ex­ports, 1 per­cent came from the dy­namism pro­vided by the Credit Guar­an­tee Fund, and the rest orig­i­nated from con­struc­tion dom­i­nated in­vest­ments and con­sump­tion ex­pen­di­tures.

Global in­vestors were aware of Turkey’s suc­cess and its growth story, de­spite all the un­for­tu­nate de­vel­op­ments.

In the mean­time, the in­ter­est in Turk­ish shares and trea­sury bills has en­abled the Turk­ish lira to strengthen and we can hope to com­plete the year with a se­ri­ous in­ter­na­tional cur­rency in­flow if the third quar­ter growth data, which will be an­nounced in De­cem­ber, reaches the range of 7-8 per­cent. We have to sup­port our growth suc­cess in 2018 by min­i­miz­ing in­fla­tion to around 6 per­cent and with steps to­wards price sta­bil­ity. This is why the eco­nomic ad­min­is­tra­tion will ac­cel­er­ate its steps to­wards con­trol­ling the in­fla­tion this fall.

Econ­o­mists have al­ready re­vised their over­all growth fore­casts for Turkey in 2017, with es­ti­ma­tions go­ing as high as 5.7 per­cent and as low as 4 per­cent. A stag­ger­ing 14.5 per­cent in­crease in industrial pro­duc­tion in July, com­pared to the same month last year, al­ready points to a 7 to 8 per­cent growth in the third quar­ter.

In­ter­na­tional in­vest­ment banks in­clud­ing JP Mor­gan, Mor­gan Stan­ley, and No­mura have all re­vised their growth ex­pec­ta­tions for Turkey.

Gold­man Sachs, on the other hand, stated that growth could reach as much as 7 per­cent in the third quar­ter. How­ever, they pre­dicted that it will slow down in the last quar­ter and have not re­vised their yearend growth es­ti­ma­tions.

Mean­while, JP Mor­gan has raised its es­ti­mate for GDP growth from 4.6 per­cent to 5.3 per­cent fol­low­ing the strong growth and strength­en­ing ex­ports. It main­tained its growth ex­pec­ta­tions for 2018 at 3.1 per­cent.

Mor­gan Stan­ley in­creased its es­ti­mates from 3.3 per­cent to 4.3 per­cent af­ter the strong growth dur­ing the first six months due to a ro­bust credit growth.

Ad­di­tion­ally, No­mura, ac­cord­ing to a view that the GDP growth will ac­cel­er­ate even more based on the growth in the third quar­ter, raised its forecast from 4.2 per­cent to 5.5 per­cent.

No­mura, who kept its es­ti­ma­tions for 2018 growth as 3 per­cent, high­lighted that they were aware of the up­ward risks in­cluded in this es­ti­mate.

It seems that Turkey is poised to stay on course for fur­ther growth dur­ing the 2017-2019 pe­riod.

Kerem Alkin

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